The party is not over yet for Tellabs.
The primary application for the CSCO's acquisitions is to target the add/drop multiplexer market. The Optical Transport market (dominated by Tellabs, Lucent, Alcatel, Fujitsu and Nortel) is a new market for CSCO, i.e. Cisco still has a long way to go.
An excerpt from SSB commemts on CSCO's acquisitions:
"The transport business is difficult because timing the market is tricky. The market can move away from a manufacturer if it is too late or too early with a product offering. For example, DSC's iMTN cross connect, which had many of the broadband features that operators demand today, missed the market when it came out 2-3 years too early. In addition, the core network within a telco is one of the most difficult areas to break into. For example, AT&T's long distance network has traditionally been composed of Alcatel and Lucent transport equipment. However, AT&T has been trialing Tellabs' equipment for the past 3 years and even Tellabs has yet to break into AT&T's network.
While we believe many operators will trial Cisco's new optical equipment, actual entry on a commercial basis will be difficult at best. We believe in the short-term Cisco will receive trials and make marketing announcements because they do not represent a big investment for the carriers. But the real test will be can Cisco be deployed in the core of the network, not just as an overlay and on a commercial basis.
Transport is a critical market because it represents the heart and soul of phone networks. We believe that Cisco's acqusitions represent a battle that will be shaping up over the next 3-5 years. With Cisco's entry, instead of a 5 company race we believe it will become a 6 company race to provide optical transport networks. Part of the battle will be who can offer the products first in the time frame the operators want and in the configurations the operators demand. The advantage for the exisiting players (Tellabs, Lucent, Alcatel, Nortel and Fujitsu) is they have both a huge installed base and should be able to provide a smooth upgrade path for existing operators to next generation networks, which is easier than replacing existing networks."
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